The
sour economy has made it difficult for many privately-owned businesses to
survive, but Chicago smoke shop Iwan Ries & Co., a fixture in the Loop, is doing
just fine because it caters to a dedicated customer base with habits hard to
break.

Through five generations of tobacconists, family-owned Iwan Ries has been
selling both luxury and mass brands of tobacco products for 152 years and it
intends to continue its legacy through the recession.

“They’ve been in business since like 1856, since the oldies,” said a customer,
35-year-old Darren Smith of Chicago. “Five generations of business in Chicago. I
like dealing with people who have been in business for a long time. They know
what they are doing and they are pretty courteous, too.”

The store, appropriately, is in a two-story building that's one of the oldest
standing designs of famous Chicago architects Adler and Sullivan. According to
Chuck Levi, the fourth generation owner, the company has never been more than
five blocks from its current location at 19 S. Wabash St., between Madison and
Monroe, and it has only 10 employees, three of whom are family members.

“We’ve always been in the Loop through all the depressions, wars and problems,"
Levi said. "We’ve managed to survive.”

Asked how hard the business has been hit by the recession, Levi said with a
smile, “We’re doing alright.”

The shop sells out more than half its inventory of cigars and most tobaccos
during the course of a year. Due to the loyalty of regular customers, most of
whom Levi knows by name and spending habits, the business is able to survive
through almost any adversity.

“I hate to say it, but the truth is when the economy is not doing so good,
people tend to drink and smoke more," Levi explained. "People are uptight for a
thousand different reasons and cigars and pipes tend to be obviously relaxing.
And at the end of a very bad day or a hectic day, they relax with a cocktail and
cigar, or a cigar without the cocktail.”

While the store also sells an assortment of cigarettes, it has a larger variety
of cigars and pipes. Levi said there are 900 boxes of cigars and 12,000 pipes in
inventory -- with 2,000 pipes on display at a time. “We have more pipes on one
wall than many stores carry. We probably have 70 drawers of pipes and every
drawer holds 24 to 30 pipes.”

The pipes, Levi said, have the slowest turnover rate in the store. If properly
stored, cigars can last indefinitely, but in the shop, as cigars are sold, the
inventory is refreshed every couple of months. Tobacco is usually turned over
every 60 days, but some has a shelf life of only about two weeks. Levi said
that's partly because more smokers are rolling their own cigarettes. The pipes,
on the other hand, have a far slower turnover rate. On average they turn every
nine months.

“Most [stores] aren’t going to invest in the inventory and in the slow turnover
that we do, but we’re used to it,” Levi said. “Even our accountant thinks we’re
crazy, but the fast turnover in cigars and tobacco allows us to afford the slow
turnover in pipes.”

The pipes range from simple corncobs priced at $3.50 up to $1500. Cigars range
widely, too, from $1 to $35.

Levi said the shop tries to cater to every customer’s needs.

“We’re a full-service store. We want to have whatever it is [the customer] wants
to smoke,” he said. “We don’t want to tell them, ‘you can’t smoke that because
we don’t think that’s good quality.’ If you think it’s good quality, it’s good
quality.”

Iwan Ries has customers all over the world. During the interview with Levi, a
man from Abu Dhabi of the United Arab Emirates called to place an order, as did
two gentlemen from Italy. The store's merchandise is international, too. Much of
the inventory comes from the Dominican Republic, Nicaragua and Honduras, all
purchased wholesale from importers.

The clientele may seem elite, but the shop also has a solid local base that
keeps coming back.

On the popular venue-rating Web site Yelp.com, Iwan Ries is a favorite among
many Chicagoans, including Andy M.

“This place is wonderful. It is located in a wonderful old building on Wabash,”
he wrote. “It is a luxurious décor that makes you feel like you have walked back
in time. I actually expected to see Winston Churchill hanging out in one of the
humidors. But, this is not a place to go if you are working on a budget. The
prices are quite high, but if you enjoy lighting up a good cigar, this is a
smokers’ playground.”

Smith, the 35-year-old customer, handles real estate and construction bids for a
living and said with the market the way it is, he tries to scrimp and save
wherever he can.

“I smoke Newports, but I choose to make my own cigarettes,” he said. At the
time, Smith was buying a cigarette-packing and rolling machine for a friend. “He
was mocking me for making my own but I have the machine and all the tools and
tobacco to cut down on prices.”

Despite a contracting economy, Smith says, he'll continue to make his own
cigarettes and buy other tobacco products from Iwan Ries.

“I spend between $85 and $100 a month in purchases. Smoking cigarettes, buying
them in Indiana, I would spend between $120 and $150 a month.”

The addictive nature of tobacco is a tough habit to break and one that most
people will not sacrifice regardless of the economy, according to Morningstar
Inc. analyst Philip Gorham.

Gorham covers publically traded tobacco companies that specialize in cigarettes,
but he says the trend in cigarettes is likely similar in the more luxury,
high-end cigar and pipe business.

“We don’t say any company is recession-proof. We expect some sort of negative
impact on tobacco companies’ top lines in the coming quarter,” he said. “But,
the addictive nature of the product and the immense brand loyalty in this base
contributes to a kind of relative strength in these downturns.”

While Gorham doubts that anyone will be eager to buy one of Iwan Ries’s $500
pipes, he said there is a sort of resiliency in the industry that will help the
company survive.

Still, Levi contends that a wide range of price points promotes stability in his
business and will keep his customers happy and smoking.

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